McGee Group Ltd v Galliford Try Building Ltd

[2017] EWHC 87 (TCC)

This was a Part 8 claim, where McGee sought a declaration that the amount of their liability for any financial claims brought by GT for delay and disruption was capped at 10% of the subcontract sum. GT engaged McGee as a subcontractor to undertake the design and construction of earthworks and related substructure works.  The subcontract was based on the JCT Design and Build Sub-Contract together with a large number of bespoke amendments. Mr Justice Coulson commented that one potential cause of the problem here was a potential mismatch between the JCT standard terms and the amendments.

Clause 2.21B, which dealt with late completion, provided the cap:

“Provided always that the Subcontractor’s liability for direct loss and/or expense and/or damages shall not exceed 10% (ten percent) of the value of this Subcontract order.”

The amended clause 4.22 dealt with claims by the main contractor for loss and expense arising out of the subcontractor’s default affecting the regular progress of the main contract works.  GT made claims against McGee for delay and disruption, and sought to differentiate between a claim under clause 2.21 and one under clause 4.21. GT accepted that their claims arising out of what GT called McGee’s “delayed and disruptive delivery of the sub-contract works”, where the alleged default caused GT to remain on site beyond the access target dates set out in the main contract, were capped by clause 2.21B. However, GT went on to say that their claims for the financial consequences of delay and disruption, which were said to arise directly out of a critical delay of 52 days to the main contract caused by McGee, were claims under clause 4.21 and so not caught by the cap.

The Judge set out the applicable principles for clauses that seek to limit liability as opposed to exclude liability altogether:

“In summary, a clause which seeks to limit the liability of one party to a commercial contract, for some or all of the claims which may be made by the other party, should generally be treated as an element of the parties’ wider allocation of benefit, risk and responsibility. No special rules apply to the construction or interpretation of such a clause although, in order to have the effect contended for by the party relying upon it, a clause limiting liability must be clear and unambiguous.”

The Judge considered that clause 2.21B was a straightforward provision seeking to cap McGee’s liability.  The cap was not said to be referable to claims which may be made under particular clauses of the subcontract or for breach of any express or any implied terms. It is specifically a cap on McGee’s liability for a particular type of claim, namely one for “direct loss and/or expense and/or damages”.  This meant the financial loss which flowed directly from delay and disruption caused here to the main contractor was recoverable, being “synonymous with the financial consequences of delay and disruption”.

The Judge considered whether the fact that the term here which capped McGee’s liability, not only for direct loss and/or expense, but also “and/or damages”, extended beyond McGee’s liability for the financial consequences of delay and disruption.  He said that it did not, noting that precisely the same claims for loss and expense due to delay and disruption under the express terms of the subcontract will be routinely put in the alternative as a claim for damages for breach of (often implied terms of the) contract, especially if the subcontractor is concerned that he may not have complied with all of the notice provisions required for the same claims under the contract. 

The Judge did not accept that the reference to the words “and/or damages” meant that clause 2.21B was seeking to limit the entirety of GT’s claims against McGee (including, for example, any claims for damages for defective work) to the 10% cap. The natural reading of the words “loss and/or expense and/or damages” was that it was identifying McGee’s liability for loss and/or expense and/or damages arising out of delay and disruption caused to GT.  It was an agreement whereby GT’s financial claims (whether described as loss, expense or damages) as a result of delay and disruption caused by McGee would be capped at 10% of the subcontract sum:

 “Anyone who has ever put together, argued or been obliged to decide a claim for loss and expense under a building contract, knows that no sensible distinction can be drawn between delay and disruption. One man’s delay is another man’s disruption. A sub-contractor’s failure to complete a particular part of his work may have an adverse effect on the main contractor, but whether the consequential claim is one for delay or disruption, or a mixture of the two, will depend on a raft of factors: whether or not the delay was on the critical path of the main contract programme, what other sub-contractors were affected and how, if others were also in default etc. It is impossible to divide up such claims between delay, on the one hand, and disruption, on the other.” 

Accordingly, the cap in the subcontract caught all GT’s claims for loss and/or expense and/or damages for delay and disruption.

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